A who’s-who of Chicago’s political elite had just enjoyed a mariachi version of “The Star Spangled Banner” when Juan Rangel stepped forward to introduce “a good friend of mine” to give the keynote speech at a banquet held by the group he then led, the United Neighborhood Organization.
“I want to applaud UNO,” Mayor Rahm Emanuel said at the event in November 2011, months after Emanuel had won the mayor’s office with Rangel as his campaign co-chairman.
Emanuel praised the Hispanic group’s charter schools. He called UNO a “great organization with a great future.”
Now, with UNO and its former leader Rangel under fire from the U.S. Securities and Exchange Commission as a result of a contracting scandal, Emanuel and other powerful politicians who helped the group become a potent force in politics and education don’t have much to say.
Emanuel’s spokeswoman referred questions about UNO to Chicago Public Schools spokesman Joel Hood, who declined to comment because “there’s a lot of stuff we don’t know yet” about the SEC case.
Illinois House Speaker Michael Madigan, D-Chicago, sponsored the $98 million state grant at the center of the SEC case, but his spokesman, Steve Brown, said he’s “not familiar” with the federal civil case against UNO.
Longtime UNO ally Ald. Edward M. Burke (14th) did not respond to requests for comment.
An aide to Gov. Pat Quinn — who signed the grant legislation in 2009 — said Saturday, “This is very troubling news.”
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Last week, the SEC accused UNO and its charter-school network of defrauding investors who bought $37.5 million in bonds in 2011. UNO officials failed to disclose to bond-holders that they had given grant-funded contracts worth millions of dollars to a company owned by a brother of Rangel’s top deputy, Miguel d’Escoto.
According to the SEC, that deal and contracts with another d’Escoto brother potentially threatened UNO’s ability to repay bond-holders, if the state had demanded the return of tens of millions of dollars already spent building new schools.
After the Chicago Sun-Times revealed the insider deals in February 2013, state officials ultimately froze the remaining $15 million from the $98 million grant but didn’t demand a refund. Rangel and d’Escoto were forced out.
UNO’s new leaders have settled the SEC’s charges by agreeing to give a federal monitor oversight of contracting for a year and promising not to engage in any “conflicted transaction” ever again.
In a statement issued via a public relations firm, UNO officials said they “remain committed to building an educated, powerful and prosperous Hispanic community.”
Prompted by the Sun-Times reports, the SEC began investigating a year ago. Though the civil case was settled, “We’re not done,” says Peter K.M. Chan, the SEC’s assistant regional director for the municipal securities and public pensions unit in Chicago. “With regard to other parties that may have contributed to UNO’s securities violations, the investigation continues. So charges against others, including individuals, are possible.”
In its complaint, the SEC singles out Rangel, saying he approved the insider contracts with d’Escoto’s brothers and made false comments during a March 2013 conference call with bond investors concerned about the possible impact of the contracting scandal.
The ongoing federal investigation also brings unwelcome attention for the politicians who helped UNO become the best-connected political force in the city’s fast-growing Latino community.
The UNO charter network expanded rapidly with support from virtually all of the biggest names in Illinois Democratic politics as well as some Republicans.
As a private, not-for-profit organization, UNO couldn’t formally back political candidates. But Rangel often endorsed and helped raise campaign cash for establishment politicians with large numbers of Latino constituents, in some cases backing white candidates over Hispanic rivals.
Rangel, who became the organization’s chief executive officer in 1996, has said he believed it made sense for Hispanics to forge close ties with the existing political leadership.
He often cited the late community organizer Saul Alinsky’s guidebook “Rules for Radicals: A Pragmatic Primer for Realistic Radicals,” arguing that those on the outs need to infiltrate the circles of power, rather than try to topple those who hold it.
In a 2012 interview, Rangel said UNO had changed the long-held perceptions among Chicago’s Hispanic professional class, who believed “you couldn’t be a leader of the community unless you ran a social service agency.”
“Where does a Hispanic lawyer fit in if he’s not looking for a job in Streets and San. or not picketing a corporation downtown?” he said. “I think we have transformed what leadership in the Latino community is here in Chicago.”
Rangel watched with pride as former Mayor Richard M. Daley appointed protégés from UNO’s Metropolitan Leadership Institute program to cabinet spots.
But UNO’s finances and clout blossomed only after it became a major player in the growing business of publicly financed, privately operated charter schools, touted as an alternative to public schools. The first UNO charter opened in 1998 with financial backing from Daley and his then-schools chief, Paul Vallas.
It continued to expand with support from Vallas’ successor, Arne Duncan — who’s now President Barack Obama’s education secretary — and since Emanuel succeeded Daley.
The group’s charter network has grown from one campus in 2005 into a 16-school chain with more than 7,500 students in the city. UNO’s charters got more than $45 million from the Emanuel-run city school system to operate in the year that ended in June 2013, records show.
But UNO’s biggest single source of public financing came in 2009, when Madigan sponsored legislation that found bipartisan support for the $98 million school-construction grant. It’s believed to be the biggest government subsidy for charter schools in the country.
Madigan, Quinn, Emanuel and state Senate Republican leader Christine Radogno of Lemont attended groundbreaking and grand-opening events for the new state-funded UNO schools.
Rangel has acknowledged that he leaned on companies that did business with the charter-school network to contribute the campaigns of his political allies. A long list of organization contractors — including the two d’Escoto family companies mentioned in the SEC case — contributed to Madigan at a 2012 fund-raiser sponsored by Rangel and UNO’s Springfield lobbyist.
When UNO’s deals came under scrutiny by state officials last year, Quinn talked tough but ultimately OKed the resumption of the grant payouts. That allowed work to be finished at a Southwest Side high school that was under construction. Quinn did so at the urging of a Burke, who’s been a major campaign contributor to the governor.
Grant payments were frozen again months later, after the SEC began investigating UNO. But the governor didn’t push for UNO to repay any of the state money, though the state could have done so under terms of the grant contract.
Contractors with ties to Burke have worked on the state-funded UNO school projects, and a Burke daughter-in-law works for the organization at its headquarters in the West Loop. In 2010, Rangel helped the powerful alderman’s brother, state Rep. Daniel Burke (D-Chicago), overcome a tough primary challenge from a Hispanic rival.
Rangel and Emanuel didn’t know each other well until forming an alliance in the fall of 2010. Rangel appeared alongside Emanuel in Pilsen on the day Emanuel returned to Chicago from his stint at the White House as Obama’s chief of staff to run for mayor. Rangel then signed on as Emanuel’s mayoral campaign co-chair, despite close ties with the other main candidate to succeed Daley, former city school board president and UNO lawyer Gery Chico.
